- The annual US core PCE figure eased from 2.8% to 2.6% in May
- New orders for capital goods manufactured in the US fell in May.
- The US economy expanded by 1.4% in the first quarter, more than the previous estimates of 1.3%.
Interest futures ended higher on Thursday as investors waited eagerly for the US core PCE report. At the same time, markets absorbed economic data released from the US, which showed a mixed picture of the economy.
The US released its core PCE data showing that the annual figure eased from 2.8% to 2.6% in May, as expected. At the same time, the monthly figure dropped from a revised 0.3% to 0.1%, paving the way for Fed rate cuts.
US durable goods orders (Source: Census Bureau)
On Thursday, economic reports included durable goods orders, GDP, and unemployment claims. New orders for capital goods manufactured in the US fell in May, indicating weaker business demand for equipment. This report supported expectations for a rate cut as any signs of weakness in the economy pressure the Fed to start lowering borrowing costs.
However, other reports showed a different picture. Notably, the US economy expanded by 1.4% in the first quarter, more than the previous estimates of 1.3%. However, this is still well below the previous readings of 3.4% and suggests a decline in economic activity.
Finally, the US unemployment claims report showed a slight decline last week from 239K to 233K. It indicated a still-tight labor market that has kept policymakers cautious. The previous employment report showed robust job growth in May. However, the unemployment rate also rose to 4.0%, revealing cracks in the labor market.
Recent GDP and retail sales data have revealed softness in the US economy. At the same time, inflation data has shown that the downtrend from last year is back, giving traders the confidence to bet on two rate cuts this year. This means the Fed could start lowering borrowing costs in September. This outlook has sustained the recent rally in interest futures. However, Fed policymakers have remained cautious, projecting just one cut this year. Still, with incoming data, this outlook could change.
Elsewhere, investors focused on the US presidential debate as the country prepares to vote in November. Changes to the government will likely come with shifts in fiscal policy. However, at the moment, the impact of the debate was muted.
